in 211, this year, opec nations stand to take in more than $1 trillion from exporting oil. our nation, the united states, will provide a pretty good share of that money, likely tens of billions of dollars, and what do we hear about it? nothing from the people who are proposing these tax increases, nothing about the tremendous sums of money that we send over seas each year for foreign oil, just the far smaller sums that could be collected from domestic companies through higher taxes. that's missing the forest here, mr. president, to cut down the one tree that just happens to be growing in our line of sight. here we are. instead of doing everything we can to halt the hemorrhage of american dollars to foreign countries, the senate is now focused on an effort to raise taxes on five companies who actually operate here. the day after we hit the debt

ceiling, we debate a measure that hardly makes a dent in the dealt and on pace to spend trillions of dollars outside the economy and on pace to incur trillions in federal debt, but so long as a few companies pay higher taxes, somehow or another, it makes us feel better. have lost so much faith in the legislative process here. no wonder so much blame for high energy prices is placed on the federal government. the proposal before us today is not an answer for high gas prices or the federal debt. it is more likely to raise our energy prices, reduce our nation's oil production, and deepen our annual deficits. i had hoped that we would have a good, a substantive, a reasoned debate and discussion about how we're going to solve all of these problems, but instead we're left to debate a measure

that is all but certain to fail. i think that the senate can do better than that. we will have debate tomorrow about the republican alternative, a bill that while it's not perfect, will increase production, generate revenues for the government, create new horethe government, create new a create new jobs, improve safety of our offshore operations. we're looking for good policy, mr. president, i think a that's where we need to start. we've got a long ways to go. but what we have before us today, i think it's unfortunate. but that, mr. president, i yield the floor.

>> delaware senator, tom carper reintroduced a bill at shoring up finances that the u.s. postal service. the legislation would reimburse the postal service for overpayments need to its pension fund, resulting in billions of dollars in added revenue. the senate hearing chaired by senator carper looks at the finances of the postal service. it's two hours. >> i especially want to welcome back senator akaka who has been on the dl for a week or two and

is back and rested. and we need and that is best in that's what we're going to get. happy to be here with senator a in scott brown and with all of you. this is not the first hearing that we've called with regards to the postal service's financial soundness, but it's an important one. other witnesses full of familiar names and organizations commandeering today is likely to be different from those we talked in the past. he needs to be different because the crisis the postal service faces is more urgent now than it's been in the past. absent, prompt action in our next postal hearing they will be about how we can help to shut down operations. it is my hope is here to jumpstart this process to develop a bipartisan bicameral consensus around the changes needed to restructure the postal

service and transfer of its operations to reflect the uncertain future that it now faces. just last week the postal service board of governors for the some sobering data about the postal service's financial performance in the second quarter of this fiscal year on march 31. the board released numbers summarizing revenues for the fiscal year today. these data showed that as those of us who follow postal issues is not recovering the economy as a whole. rather than electronic version, the male is likely permanent despite the postal service's best efforts to bring in new customers and reserve those that it has today. in the period between the beginning of january in the end of this march, mail declined by more than 2% versus last year.

this follows two quarters of modest growth. at the same time the postal service had first-class mail last 6% containing its patterns of years of steady decline. these developments are contributing to losses by the postal services. midway through the current fiscal year the postal services and programs than $2.8 billion. his projected losses were $8.3 billion, nearly matching the record 8.5 experienced last year. these volume and revenue numbers are worse than postal service initially project did and if the losses at the end of the year are truly as bad as we are now being told they will be, i understand the postal service will have exhausted all of its $15 billion line of credit for the treasury by the end of september and into the fiscal

year 2012 with just enough cash on hand to get by. and it doesn't get a lot better from there. getting by in 2012 will likely mean that the postal service will not be able to make its $5.6 retiree health pre-funding payment and could even have difficulty meeting other normally routine pension and workers compensation related team spirit and top of that miniature crisis occurs at the next next year or so purchased for their economic slowdown could well push postal service over the edge to insolvency and results in a shut down of its operation, something none of us want or need. the postal service were to shut down, the impact on our economy would be dramatic. as opposed master charles donahue will testify to us today, postal service operates at the center of the industry that employs some 7 million

people and generates more than $1 trillion of sales and revenue each year. at such a difficult time for a country, we can now afford to put those jobs and product to be in jeopardy. in recent years the postal service is to ensure to respond to its declining demand for hardcopy mail it to to better align its cost with his revenue. total cost has been reduced by $12 million in recent years. a big contributor to the success of an elimination of more than 113 postal service jobs since 2007 and more than 200,000 over the past decade. i think it represents reduction of our first by a little bit over 25%. these savings are continuing includes significant new

workforce flexibility is. the postal service has introduced a number of new projects. one of those is the flat rate priority mail box. we are rapidly reaching the point however by which the postal service no longer has the authority under current law to do what it needs to in order to survive and prosper. that's why i'm introducing today legislation that aims to clean up the postal service's finance and health implement the initiative reorganization plan that it announced last spring. the main provision in my bill, postoperation sustainability and transformation that for the post act aims to personally address the various pension and related issues that have plagued the postal service for years now. the postal service inspector

general, the post of regulatory commission and two independent actuaries have all come to the conclusion that the postal service has overfunded its obligation of civil service retirement system by between 50 and $75 billion. numerous observers and the office of management and budget out the postal service and makes it pre-funding payments taken up words of $5 billion when those payments are satisfied could be used to pay workers compensation obligations and retired to go to the treasury. these changes are sent and

similar to them will need to be a vital part of any effort to improve the postal service's financial condition for both the short and the long term, but stopping these reforms and avoiding potentially more difficult changes simply will not be enough. more than $203 billion between now and 20/20. 230 billion. the pension and retiree health plans for my bill and others have been introduced including a belt that senator collins would only address a third of these losses. in addition the postal service latest financial data shows that even the retiree health pre-funding not made this here come the postal service would still face insolvency and shut down in 2012 and even if the 2012 retiree health payment is

not needed, they would enter 23rd team with no cash and no borrowing room at all. more will clearly need to be done. that is why my bill takes important step towards truly giving this postal service the flexibility that those of us in congress always say they want to give them to adapt to new realities and forth like businesses. no business faced the kind of difficulties and challenges the postal service faces today was survive for very long if we were told how many retail outlet to have midway should be located or if it were prevented from making operational changes and expertise that it has as its disposal. if that's what the congress does to the postal service. i stress these problems and take congress out of the day-to-day management of the postal

service. the postal service can continue to build on its recent cost-cutting efforts in the labor unions that are represented in most of the workers. but even at the postal service can continue to build on its recent cost-cutting efforts, these changes in years to come. the gao is releasing today a viable case study. the report clearly sending a negative impact of the financial uncertainty and sometimes harmful dictates from congress have been on postal operations. gao found on the for example, that due at least in part to the postal service's dire financial situation, and they currently have no plaintive pleas to replace its very large fleet of delivery vehicles, some of which were first put on the streets a generation ago or more.

the cost of operating and maintaining vehicles are increasing and at least some cases is having an impact on operations. i believe it's unacceptable that the postal service has no plans to date to begin replacing its aging fleet. perhaps of more fuel-efficient vehicles for purchase at which the large numbers could help commercialize new technologies. it's also unacceptable the postal service has been placed in this position financially, in part due to the acts of congress or inaction of congress. i look forward to hearing from witnesses today about these and other pressing issues facing the postal service and i would also note that senator susan collins with whom i've worked on a lot of issues has introduced around bill and a fair amount of overlap between the overlap between the sheets proposed. my hope at the end of the day is work on these issues and others will find common ground.

as i said earlier, we need to develop a bipartisan bicameral approach to address these challenges. i hope his many of the members in this committee will be part of the resolution. having been said i recognize senator brown and then we'll turn to senator akaka. >> thank you mr. chairman. i'm not going to repeat a lot of what you said, but i do want to point out that i agree with you in that we need to allow the postal service to tools and resources they need to move forward. we need to remove some of the roadblocks so they can provide the service and guaranteed to their communities and not adversely affected. the party dressed obviously the fund overpayment. i think there's general agreement. the question of flexibility to

work in a responsible manner to solve their own problems because clearly the path they are going down is not sustainable as you pointed out and i look forward to working obviously with u.s. senator collins and working on these very real issues. i appreciate the opportunity and the court to testimony. >> inc. so much. the entire statement will be made part of the record. senator akaka, welcome. >> thank you very much, chairman carper. i went to thank you so much for holding this important hearing about the future of the postal -- united states postal service and may also want to welcome the postmaster general and ceo of our u.s. postal service and herr to our hearing. as we have heard time and again

over the last three years, the postal service faces a devastating financial crisis. at the end of the fiscal year, the postal service may not be able to fully pay its $5 billion retiree health benefits free funding obligation. the government accountability office released last year expanded several options to help the postal service. so i want to commend senator carper and senator collins who have both introduced legislation that aims to help the postal service meet these obligations by addressing overpayments to the retirement funds. additionally, senator carper's post at offers several

provisions, which would allow the postal service to innovate and expand its business. both of these bills still contain a provision introduced in the last congress, which would bias the collect the bargaining process to favor the postal service during arbitration. the fact that the postal service ratified the contract just last week demonstrates that the postal service and employees can work together to reach an agreement that meets everyone's needs. congress does not need to inject itself and the collective bargaining process. i also want to mention the issue

of five day delivery. as i expect it, the postal regulatory estimated saving for cutting a day of service and more than the postal services. the prc also points out that postal service did not examine thoroughly the impact on rural areas. i am concerned about the impact of cutting service, which already has slowed delivery to its location and the challenges moving between islands. ultimately, i do not believe this change would help the postal service attract new business quarter revenue. instead, it could harm those who rely on the postal service. again, i want to thank my

colleagues for their hard work on these issues and thank all of our witnesses for their contribution to the entire process. these hearings will help us to move forward with legislation to finally ensure long-term postal service. thank you very much. >> it's great to have you back. our first witness is supposed master general -- senator begich, and he slipped on me. it's good to see you. they can, we spend most of our day together. our first witness today's the post general master pat donahue or this is mr. donohue's first time testifying the subcommittee this is your first time?

first time this postmaster general. for assuming the position mr. donnie is served as deputy postmaster general and chief operating officer at the postal service. mr. donahue spent his entire career at the postal service as a clerk in his hometown of pittsburgh. next we have the lip herr at the government accountability office. mr. herr has been the gao since 1980 and has a broad range of issues including postal issues. we look forward to your testimony here today. both of your statements will be admitted in their entirety for the record. if you exceed five minutes, i will say much. if you exceed seven or eight minutes, i'll say something. so please proceed. mr. postmaster general. >> thank you, mr. chairman. good morning, mr. chairman, members of the subcommittee.

i appreciate the opportunity to testify in behalf of the u.s. postal service. thank you for the invitation and thank you a mr. chairman for calling this hearing. the postal service plays a vital role in american society and the american economy. postal service will deliver more than 165 billion pieces of mail this year and shipped within 2 billion packages. read the backbone of a $1,000,000,000,000.000000 industry. the postal service is a self funding entity to innovate and compete for customers. we provide reliable secure and affordable delivery platform for american business come and therefore in the national interest to keep the postal service financially strong. like any business, the postal service is subject to marketplace trends. unfortunately seen a significant long-term decline in their most profitable product category, first-class mail, which accounts for approximately 15% of our revenue. people and businesses are electing to send and receive statements to pay bills

electronically. this produces mail volume. with aggressively cut costs in response to economic trends and reduce the size of the workforce by more than 113,000 employees over the last four years and we are consolidating processing and retail facilities. our total cost reduction in excess of $12 billion. we responded to volume declined by working with corporate partners and improving experience and creating innovative products for demand. it would've recorded a cumulative profit over the last four years. mr. chairman, despite our significant role in the american economy and our interest in cost cutting and generating a first come i regret to say that we are in serious financial

predicaments today. as things stand, we cannot have the cash to make a $5.5 billion prepayment for future retiree health and if it and we may be forced on other payments that could extend to operational expenses. the cost of potential delivery disruptions to the economy into the country country cannot be overestimated. even the threat of such disruption would have significant impact on america's business and irreparable harm and america's faith in the mail. mr. chairman, we need legislation this fiscal year and i am grateful that both you and senator collins have introduced bills that address some of our most serious constraints. we especially support provisions that would eliminate the retiree health benefit repayments by reallocating our civil service retirement overpayments, that would return the federal employee retirement system overpayments to the postal service and provide the postal service flexibility to determine

its own delivery schedule. i would also urge the subcommittee to start the legislative process with the long-term approach our business model. we assisting financial losses over the past several years that have created negative perceptions about the male postal service to some extent has had a negative impact on their business. the fact is that the right legislation the postal service can return to profitability is given the flexibility to do so the postal service will continue to serve the american public are effectively and continues to sustain and propel american commerce. mr. chairman and members of the subcommittee, look forward to working with you in support of the schools and thank you for your leadership on this port. thank you. this concludes my remarks. >> thank you. we have a motto, five minutes or less.

chairman carper, ranking member brown, i'm pleased to be here to discuss chios work on the fiscal service. i'll discuss the postal service says key issue on that seat being released and broader challenges the postal service needs to realign all its business model in the face of mail volume. total mail volume decreased 3% in the second quarter declined by 7.6% compared to the same. i share. halfway through the fiscal year, postal service is reporting a net loss of 2.6 elion. as acknowledged today, the postal service projects a $15 billion debt limit this year in default on a 5.5 pre-funding plana for retiree health benefits. against the backdrop for the postal service needs to modernize its operations, including preparing to upgrade. the postal delivery has 192,000

people is, most of which are custom-built about 16 to 23 are sold in her perch in the of the day to 24 year operationalize. the fleet includes about 22,000 commercially available from age two to 13 years for the expected operational life with 10 years. they cost about a billion dollars in fiscal year 2010 or about $18 per vehicle. our analysis found that track maintenance costs averaged about 2600 per vehicle which is a bit understated because subcontractor costs were not included. about 53 new vehicles required more than 7000 costs. the 700 vehicles required more than 10,000 direct cause. over one dbx says replacement cost. dirty 1% of delivery maintenance cost for scheduled maintenance. 11 percentage points.

we identified maintenance problems for replacing frames were not being followed. friends were only replaced with four holes. we also found frames in severe less problems in new york state. featuring replaces private fleet managers reinterview to the vacation that's designed to replace however, upgrading about 31,000 people. fully refurbishing thusly would cost less, about 3.5 billion or about 20,000 per vehicle, although the current course and replacing frames, motors and transmissions is effectively refurbishment at the slower.

deepak acquisition requirements need to be factored in to replace delivery vehicles as well, namely the 75 vehicles as i acquisition costs and may not be operating mines and currently travel about 17 miles a day. by the postal service has been able to maintain its current sleep come in the time of come when the cost will not allow further delays. we recommend the timeline for addressing this need. more broadly, an agreement will stabilize the postal service and align it cost of revenues for capital investment. as we previously reported, congress will consider modifying the funding requirement in a fiscally responsible manner

chairman carper, ranking member brown and members of the committee, that concludes a prepared statement and returns the questions. >> thank you for that testimony. i want to drill down sql on the gao report released today, dealing with vehicles. as i understand it, the number of vehicles the poster service pack, roughly 135,000, close to 200,000 about 20 years don't go very far. they average about 17 miles and the cost of see how, you can clarify, we're talking about the cost of fuel for these vehicles? >> we said a billion dollars for maintenance.

the direct maintenance cost was about 750 million the feel cost less fiscal year was about 250, although the prices going up probably would've increased. >> one of the things the previous postmaster general, organize labor unions that represent the postal employees in the previous postmaster general is for us just to be creative and think outside of the box. we're looking for the postal service and we've even suggested you create if you haven't already and they come up with clever ways to create revenues and reduce costs. i want to think about energy costs and talk about what were doing already to bring down energy costs within buildings.

and whether or not there's any potential for a similar approach >> first of all, let me thank you were very proud of that and an energy program about four or five years ago now mainly focused on buildings and when you look at electricity, it comes down basically to how much it cost to keep the lights on in the facility. we've done a lot of investment around special system setup was in our large facilities to manage that, but we've done a lot of simple things, just like replacing light bulbs or more cost efficient bulb fixtures and very simple things like keeping the lights off. so we've been able to cut electric usage by about 30% over

the last four years and that something was very proud of. i've also listed a number of other facility innovations and upgrades. we've invested in things like reverse to help us not only sustained, but also an energy comp survey should standpoint, too. from the vehicle standpoint, we look at on the options right now. we have been experimenting with hydrogen vehicles, natural gas, diesel, lecturer, hybrid and try to make sure we look at everything and anything out there and we have two considerations. number one, the daily cost to operate the vehicle, but more importantly the long-term cost and that's why doesn't he look to a lecture, we've got to maintain calm in mind that leaves come the idea to replace batteries and that has to be considered part of the long-term investment. right now we're at a place where we will have to buy some vehicles in the next two years.

but in order to do that, we've got to get our finances in order. again, you appreciate your bill because that will help us get the short-term finances in order that we can address on the long-term investments. >> any comments in response to that quiet >> we did ask a few folks in the industry about the idea of the energy sharing contracts. one of the points they made is because the vehicles travel relatively short routes and use small amounts of fuel, that can -- it may work well with domains, but may be a tougher thing to use in terms of vehicles. >> under the energy sharing contacts, as i understand folks coming into work to reduce energy consumption. and their payment stream will flow from the energy savings that are created by the retrofit. and that just doesn't work for vehicle assessment. >> it would be a new idea for that deal, but i think given the fleets and also the long -- they

are hoping to do another by would raise some other questions in the long-term commitment, too, for the industry. >> one other thing i asked you to keep in mind as we know places that are undemocratic and unreliable. we're pursuing and my estate may be though windmill farm and be able to seal at least 100,000 homes a day. we know the windows don't always blow in the sun does in a way shined. one of the things i like was to keep in mind i don't expect you to think as we look outside the

box and trying to reduce not just are building costs, but also her vehicle costs for energy, see if there's some other way we can use the opportunity to make money or save money, not just throw out an idea. are moving towards hybrid vehicles. chevrolet built 10,000 this year come in extra totaled 50,000. we're going to lunch 80 miles per gallon at the end of next year. they have to be field someplace and were going to be looking for fueling stations for electricity. to the extent the postal service or the business of using electricity to power vehicles, there may be an opportunity to also sell electricity to the customer or for looking not the price of natural gas. the other thing cannot predict

the ball soars of wind and solar because they're not always fair. but if we had somehow a fleet of vehicles come in maybe 185,000 vehicles that could almost be a reservoir for electricity. so when the sunshine and wind is blowing, you actually charge the batteries in the vehicles and then sell it back onto the grid. that might be the opportunity. i don't know if any of those ideas will actually work out. that kind of way we have to think outside the box, be more entrepreneurial than we've ever been. part of the responsibility is for us on this side. and the others may be working with the folks in the abu industry with what might be possible. let me stop there. i have another round of questions about come to that later. tanks. >> thank you, mr. chairman.

mr. donahoe, what do you need congress to do to get your financial house in order? what recommendations do you want us -- to have to so you can solve the problems? i appreciate the hearing. and that to you exactly specifically what you need from us in order to become financially viable. >> well, we need this bill passed this year. >> what though? the ability you recommend we passed? >> i think the post that was by senator carper answers the need for the postal service both in the short-term and long-term. it's a very good portions of the bill by senator collins and hopefully everybody can get together and get those parts into the post though. but the postal does for us is that it provides immediate resolution on the retiree health and it fits. >> that the number one thing.

>> that's the number one thing. we need the ability to shift out of her. >> that has to be addressed. the critical thing and that's the reason i see the entire bill is because not all make it says to break even now. it does not help us in the future in terms of paying off debt and even when you get out two or three years down the line will be back in the same boat. >> so if we allow for the shifting it will basically give you about a one-year window? >> that gives us a year window. >> that's number one paired with number two? >> to resolve and returned her federal employee retirement system. we are overpaid the post though against the retired health benefits and paid that going forward >> how far does that get you? >> is worth 7.9 billion. that would pay half of our debt

off. >> and then were? >> in the delivery flexibility. one of the issues were faced with going forward is the problem of declining first-class revenue. and mention the first classes half of our revenue. it is two thirds of our contribution in terms of paying for the overhead that pays for keeping the routes fully staffed on a daily basis of 200,000 routes plus 35,000 post offices. that's all paid by first-class. >> the price of the first-class keeps going up. i'll just get in line and out. why would i spend another 44 d., whatever the ultimate number will be. what if the volume goes down? >> us who are facing. this year is 7% last. in the last four years, first classes dropped 25%. if it's unreasonable pressure in the organization. what we're proposing is

flexibility for delivery. >> talking about routes and elimination of potential services to get in there and get great at it. >> here's the thing. there's two things. we have been very -- we've worked very well with the agents and will carry you need to consolidate routes. we've taken 15,000 routes on the last four years, which is well over a billion dollars in cost there alone. but we need is flexibility to eliminate saturday delivery is required and mandated by congress. >> saturday everywhere for saturday somewhere quite >> we are proposing to keep the post office is open, allow customers to receive mail through post office on saturday, but we would eliminate regular delivery on saturday in regular express mail on saturday. there would still be serviced, but we would take costs out of our network. >> what's next? >> what is next after that is

continuing to be able to be very flexible as far as what we do with product offerings and additional revenues generated in the organization. senator carper mentioned innovation. we are very pleased with the innovation we've taken on listening to our customers. you've heard about flat rate boxes. if it fits, it ships is great because customers can use this in many different sizes, different prices. all you do is put your package and you can even ship it from your home with free carrier pickups. we've got other products coming to sample box coming out. we think there's a lot of growth in there. here's something that's really interesting. we've been talking to the mailers about this. it's called a qr code. this ties in some of the latest technology he heard here so it works. he was a mailer to send to somebody's house. they take it out of their mailbox on the message says for

information take your phone is scan the barcode. what this does is ask you up to a website where you can find out more about the product and buy the product online to conduct a whole transaction within about five minutes. >> you going to get a piece about? >> yeah, we've even talked to people, so free enough to do those things to continue to work with the postal regulatory commission has a lot of options there, too. >> mr. herr comic thank you. were talking about the fleet vehicles and updating and not be a slave as they travel such a short amount, i have a hybrid conversion bill that would allow the conversion with a simple process, say 25% consumed. i am interested in dissecting your report a little bit and understanding. if there is a mandate to do ask

amount, does that come into play that it may not be cost effective to do that quite >> in terms of alternative fuels? >> right now there's a price differential is $10,000 -- over a fleet of that i've come it would race and challenges. it's also been improvements in technology and gas engines being developed as well. some of those on some have been certified by epa as well as the mission. there have been some things evolving. over the next two years i think senator carper said from watching how the industry changes may be important to see what makes the most sense. >> i'm all set, mr. chairman. >> senator, there are more marks in the u.s. senate. how many are there? four or five? >> four with marco rubio. the mark caucus is well

represented today. >> if i can do a quick follow-up on a couple friends. i agree with you on the short-term -- on the short distance it's hard to get economics under fuel efficiency. but on your long-haul trucks, are you looking on those with some of those large semi truck movements because that's where the real money is in energy saving on vehicles. they go done a big long path there, that tracks, are you looking at that piece of the equation? >> yes, senator. we do two things is what we call the heavy fleet. we've got her own fleet of vehicles, two-ton on the way up to the tractor-trailers. we are working with the industry to have the latest as far as technology. as a matter of fact in new york city would operate 30 electric and two-time vehicles and we've been very successful with using

the technology. the majority of our long-haul heavy fleet is done by contract and we work with our contractors on that, too. they are senates the contract to make their vehicles more energy-efficient. when you're driving along the road, discursive and putting on the trailers, all of our contractors are moving that direction because we found a simple addition like that helps fuel economy. we have sent people to work closely. >> have you thought on the under the -- i forget the number. you said 185,000, 20,000 vehicles. just going out to the market and say look, here's what we need. we need to replace this vehicle fleet. we're open to lease, purchase, you know, when we got heavy into 15 oliver computer systems, for example, the department says we are buying this stuff because the change occurs, but also we

figured we could get a better deal with the companies because they refused us as poking up their production and therefore cut their costs and do other product off the same frame and ours was the same computer technology. have you looked at it rather than you are trying? sometimes i wear the government and quasi-government tries to analyze what is the best result rather than going out to the private sector, saying okay, this is so weak. 185,000 vehicles to purchase the parameters. give us your best deal and what you can do to bring the same cup even though the hesitation would be the money. well, you don't know what they can offer good until you ask the question, they are hungry out there. to approach it that way? >> you're so we've been doing. we have been working through the technology is just to get an idea of how well it works within our organization. one of the things we learn from

the vehicles with the original intent to try to keep for 25 years was to test ban in arizona. arizona is not a real good place to test vehicles. if you need to be in the states and from pittsburgh. granados know if you, but we have our obstacles going up and down how the wintertime. at any rate, what we are doing is looking to figure out what the best technology is. we are working with the private industry. with a general motors on the hydrogen fuel. we've had a number of companies with ford, chrysler and other companies. we're trying to figure out the best thing. the key thing for us right now is this, we have got to get a good idea going forward on what the technology for quake four, five, six in 10 years down the road. we've done some leaseback work

in the past that's not been the most effective for us from a financial standpoint because i can't write anything off from a tax perspective. so we are looking ahead. we've been talking to private industry will make some decisions, probably two or three years down the line because again i've got to get the short-term financing straightened out the rest assured it will work with the private industry on this. >> let me ask you when you came to map a couple months ago, first i want to say thank you for recognizing alaska's unique. we had a conversation about universal service is for all areas. as you know, we've written a letter regarding five days. i recognize flexibility in my big concern is how do you deal with the areas that may have flights coming in and certain supplies that come in on certain days in rural alaska. maybe saturday is the day because the weather is good on

some other issues. can you give me first your thumb in universal service and bypass combination of the two and how yellow dress borough communities and obviously unalaska with five day versus what it is today. but first on universal and then bypass. >> as you know, we are fully in support of our mission to provide universal service to the american public. any changes we make so comes first and foremost. services are name and that their mission. from the standpoint of how that ties to the bypass to realize how important the postal service is to not just the economy in alaska like it is to the rest of the u.s., the people's livelihood to get food and medicine and we also take that very serious way. i think our people to a good job making sure the mail gets through everything. your point about the delivery and discussion around saturday's

something we've been looking at. we've had some comments from a number of people from different parts of the country about what do you do going forward? our proposals are delivery flexibility and it's just that. we think for the most right that we would make the changes and saturday would be a day, but there's some weeks during the year that we don't deliver mail on monday. we are taking this may be delivering on monday and some of those cases. in the case of alaska and hawaii after some provisions we've got to work with, like you said, there's no cause on a saturday. we have to be flexible with that, too. that's why we've used the term delivery flexibility. we went to her because we realize it's our responsibility to provide the service. >> lasley because my time is about to expire, how would you be engaging stakeholders like in the case of rural alaska versus anchorage or fairbanks? how you engage on this schedule

flexibility? >> one of the things we did last year we spent some time and of course we can do that again as we move towards changes that we would be getting out of the passage of the post-act. we would engage customers the same way we change post office access point. we're going through a process right now where we are looking at mailing out and inviting people into talk to us. we would do the same thing, with the customer service is the mail and customers to center. >> i just want to agree to in the pension issue. that is a critical number one issue in a very supportive. i think you're doing a great job there. >> senator pryor. >> thank you on mr. chairman. when you start with your family. the poster regulatory commission made some recommendations last year about some things you should do is your closing post

office is. one of the recommendations is people in the area should receive actual notice, which i assume would be like a postcard notice and apparently your current practice is just to notify your p.o. box customers and carrier delivery customers about the affected facility. the site recommendation would be that the postal service would expand methods available for providing and receiving customer input. the third recommendation they made is they would expand the contents of the public notice and include better information about alternatives for customers. my understanding is he didn't implement those recommendations? do you know why you didn't? >> were having some post offices closed in our state and the people in our state at least feel like they are not notified of this adequately.

they don't have opportunities for input. whether opportunities for input it seems like decision had been made and maybe are going through the motions to check the box but you're really not take in consideration. if you want to comment on that. >> we don't go through the motions. i may say this. we agree with all the recommendations and we have changes be posted in the federal register recently to implement those changes. here's what were looking at. we like to call it access change versus disclosing post office because the intent is to provide their access to the american public. we are going for a process right now we've had a process in place for 30 years where we've examined small offices and we agree that it could be much more customer friendly. milly notices out to customers, having community meetings and also listening to and providing them -- listening to their

recommendations and providing what they're asking for. we're looking at this across the country. today 35% of all postal service products are bought outside the post office whether it's online or at cost or office depot or places like that you can buy stamps and packages them that will continue to evolve in that direction. what we want to do is make sure where we are aware the american public needs is to be. that's the case with large offices like in washington d.c. for rural. but when i do is take a close look at how to provide the access in the best way both financially as well as the number of hours a day. i give you an example as things were some small offices were looking for consolidation because we find many houses don't have an hours worth of work in a day and people don't have that much business. if it's close, a mile or so. other cases are looking at many

talents of three businesses, gas stations, general store and post office. we're looking for talking to the general store for gas stations that keeps them in business, keep the cash flow and allows people to have access to the business at the same time get their postal services through that way. many options are willing to want to hear from people. >> let me ask you this follow-up. it was me and you want to hear from people? >> yep. >> how many facilities have been on the list for closure? and then he went to the public comment process and decided not to close? >> i have to get back to him that. i can't tell you off the top of my head. what we've been focusing on most recently prior commitments that were rd closed and we've just seen the paperwork up and finish them off. there is a number we're looking at right now is about 1000, but

it have to get back is far as specifics. >> i like to know those numbers. mr. chairman, other record along those lines. i would like to ask about senator carper's bill. sounds like you a party said he the financial parts of this legislation and you think that's very important for the financial viability of the post service. but if you got a five day delivery, how much will that be the postal service? >> i will say this about $3.1 billion. >> the year? >> a year. and on the criteria -- this is another part of the chairman's bill, but in the for closing post office is in postal facilities, you mentioned today small facilities or low-volume facilities. what's your criteria. what criteria does the postal service used? the mac we are looking right now

the first at less than an hours worth of business in a day and that's generally 10 or less transactions. >> is that in that the postal office will close their? >> that means we are looking on it to either consolidated or potentially contract the work out or leave it alone. we're trying to keep as much of an open mind on this thing, but again from a financial perspective we have to put everything on the table as far as taking costs out of organizations. >> it seems like its members driven. i can to get some samaritan center begich his favorite low-volume because they have very sparse populations. would you consider that as well? >> again to my comments was to balance the requirement for universal service. in many cases is something you don't look at. if you have a small office that doesn't generate much revenue,

we certainly wouldn't close it. but if it's something that generates the revenue and there's the potential for better access within a half-mile per mile, that's a different story. >> one of the provisions in senator carper's bill talks about the shipping of alcoholic beverages, which right now you are prohibited from doing. q. how much revenue it generated fewer like to ship alcoholic beverages? >> we don't know, but we think it's an excellent i.t. is because the postal service brings his convenience and the whole industry. we've seen other -- australia has done that and that's one of their biggest growth products. we've got the network to provide that service along with the ability to have it held. our proposal is more for pickup, so that talk about to come in and pick the alcoholic beverage. we think it's a very interesting proposal. >> one last question on senator carper's bill and that is there some provisions in their about

when you are in arbitration with your employees that the arbitrator could consider the financial condition of the postal service. is that the rule today or would that be a change? >> that would be a change. we support that. we think it's important anytime you go to arbitration, especially in today's world where if you look at the future of postal service, the arbitrator should consider -- we recently conducted a negotiation with the american postal workers union. i think it was a very good responsible contract by both sides. that's a great thing.

>> that's very smart gove. our next-door neighbors get netflix and it's a good piece of business and and how this will be when people move into screening and it's the kind of thing that we just want you to do more and more of. i just want to ask a question

about how important is it that the postal financial bill that we consider here in converse go beyond the pension and health issues. how important is that? >> it is critical. as i mentioned to senator brown, what happens is if we just address the retiree health benefits that just gets us through this year from the cash standpoint and if you recall we lost $8.5 billion unfortunately this year we are predicting losses around a billion dollars so you can see if you get the relief of the 5.5 or $5.6 billion going forward that will not be enough. it's critical that we address the issue, the overpayment and then we can get that money back that will go against the dead we will not spend that anywhere else on the retiree health benefits or the debt, the delivery flexibility, the flexibility going forward on the products we talked about anything and everything in the bill was critical. we have to get the whole thing

done and from the industry standpoint we have to make sure we make all those things happen. >> it seems there is a fair amount of agreement we'll try to redirect the payments in the retirement system, the overpayments into the system and to use those to pay down the obligation for the retiree health and also for maybe workers' comp. but as we understand, that's only about maybe one-third of the problem. so in terms of going forward if the flow of money from the retirement system and stopping the overpayment i think that is only about a third of the problem. >> this is what happened. right now we have an outstanding responsibility of $91 billion for the prepayment of the health benefit. we pay 43 so far through the rate payers money, so that's --

we've got about 47% of the way paid. if we were able to access the funds 50 to $75 billion, that would clear that side of the ledger. the volume loss we are experiencing in first-class mail keeps the pressure on our organization and the industry as a whole to continue to reduce cost and at the same time figure out how to use it in more creative ways like i've shown before - with packages and even trying to slow down the drop-off in the first class. one of the things our customers told us is if you can figure out a way to make the first class more appealing from the bill presentment standpoint, we will try to work with our companies to stay in the mail. the first recommendation is what was called reply rights where we were going to charge the same post for 1.2 offices as we do for one else. the customer said it's too complicated so what we are

proposing now is to give 2 ounces for the price of one this with the customer can use better paper, the messages in with the first class correspondence because in many cases that's the only way a customer gets the customer's eyes, so our proposal is we want to keep our foot on the gas pedal of the cost slightly we've been talking about, the revenue is just as important. >> dewaal to comment briefly on the question. the first question i asked in this exchange is hauer important is it the postal financial relief bill we consider go beyond pensions and the retiree health issues? >> if you take care of the one without addressing the overcapacity processing network and looking at alternative ways to provide the retail access in a few years you will come back and find some of the structural problems were not addressed and you will be facing a similar set of challenges. the list of 25%.

the projections for it is going to continue to decline so address in that capacity and making sure the system is aligned with the needs of the mail coming in would be critical >> you've concluded a round of negotiations, and it sounds with the contract negotiation but i think it seems like a fair contract and heading in the right direction. we have three other unions to deal with. give us a status on the negotiations with those, please. this to meckler stila in negotiations with several carriers. we would like to conclude a successful negotiation with the same outcome. i think the ap w is a responsible contract not just for the postal service and the employees but also the industry so we would like to conclude the same way. this november we began discussions or i should say

august because the contract ends in november with the mail handlers and the national association of letter carriers, so we expect to see the same type of framework in those contracts we've been able to negotiate with the apw. estimate this will be the last question i asked and we are joined by senator mccaskill. i want to talk about a business opportunity to read the last white feel about the six day delivery, and i said why was agnostic on that and if there could be a way to save substantial amounts of money not as much as 3 billion but through the negotiations, then i think we ought to consider that. if we can't find substantial savings we are not going to consider that as much the we talked about the opportunity costs cut and of not having that sustainability. i think there is -- we talked about this before. someday somebody will look back at the postal service and say we

had a post office in every community in america and went to every door six days a week. why didn't we think of xy or z in being able to exploit that all business model, just talk to us very briefly about the opportunity cost of eliminating the mail delivery whether it is expressed or doing the work for fed ex and ups, let's talk about a little bit if you would. >> you know we would rather not eliminate saturday delivery. we feel proud of the fact we do go to homes and businesses every day, six days a week to every home and business across america. the critical issue was the continued pressure we have on first-class mail and the fact that the contributions as that drops continues to put financial pressure on the organization hot hot. we think it's important to provide that service and even if five days a week we will still have the greatest network of

everyone because we will continue to go to every home and business five days a week. we also think it's important to continue to work with our customers to sustain first class as long as we can as well as new opportunities from the other standpoint. and i think you would be and that is a combination of reducing and eliminating the retired health benefits, delivery flexibility. that takes us from 73.5 giunta 65 billion in between. administrative cuts come successful union negotiations i would like to get us down to 60. what that does is gives about a $5 billion cushion from the revenue right now that we will have this year that gives us the ability to pay down the debt

that keeps us from going into the future and addresses the capital issues we've been talking about today. seabeck thanks so much. senator mccaskill. welcome. >> i would like to fall on the chairman's question he just asked. we have a difference between two different agencies that say that a five day delivery you all say it's going to save 3 billion the regulatory commission said it would generate 1.7 billion. i don't know how much of that difference is attributable to the loss of business that inevitably is going to occur when you can't do this six day delivery. you have an advantage right now that was six day delivery. if you were looking at this through the very cold lands of a pure business model, you are giving away the major advantage

have when you give away that sixth day. can you speak to why there is such a wide disparity between the savings the two agencies came up with, and you know, what keeps us from going up to four? and aren't we really if we are not careful, if we go to five, aren't we talking about the beginning of a death spiral here? >> let me address a number of the questions. first of all, to repeat what i said to the chairman, we do not want to go to the 65 but financially we are in a situation where we've got to take that as an option going forward and it is tied directly to the loss of a contribution on the first-class mail. if i had an answer to stop that we did that in place right now. america is changed and people are paying bills on line, every bill that's paid on line that is 18 cents comes out of the cost to cover the six day delivery

and office is out there. the difference between our estimate and it boils down to two things. their estimate of revenue loss, 600 million, ours is 200 million. we talked to a lot of customers and did a lot of opinion polls. many customers in the past used to make sure that they -- that we delivered mail on saturdays. they've moved away from saturday by far our latest date of volume for two reasons. a number one, many businesses are closed saturday and number two, what we've been told his people to a large extent don't look at their mail on saturday as much as they do the rest of the week because they're busy with other things. so, the 200 verses the 600 million that's part of the difference. the of the part of the differences our estimates of being able to save and capture the costs. we think we can capture a substantial portion of the cost of saturday delivery by observing it into monday.

the letter mailed we deliver today is sorted by automated machines and processing facilities. so that the variable cost in the morning that a carrier would have experienced years ago they don't experience today. once you're on the road and deliver to a number of houses our average cover is around 90% today. every saturday business costs us $3.8 billion. we think we could save 3.1. we know that we will have to add some costs we can't afford but based on our history we've taken cost of the organization and we will be able to do that. theater thing is i in canada devotee to do with its going to get done. >> let me also ask about the potential to impact on the five day delivery on the residence. i was disappointed when i realized the postal service's survey the you did in this

regard or not really in the rural communities. one was in suburban atlanta, and the other was suburban seattle. would it be possible to take a look at a rural community, not one that is within commuting distance of a major city is those folks that in terms of getting their medicine, which of course we all know that saturday delivery is very important in terms of their ability to receive mail on saturday. is there a reason why what i would call a world community is that included in the survey? >> we can go back and take a look at that. there's also been a number of surveys done across the country by restless and at the gallup poll that have looked at different communities across the country, and consistently what comes back is when asked the question if you made a choice between no delivery saturday

closing post offices or substantial increases in postage rates 70 present of americans have come back and said eliminate the saturday delivery. our proposals to eliminate the delivery would keep the post offices open so from several perspectives people would still have access to postal services and if they wanted they could rent a box and get their mail that way. >> fodor role post office closing, i'm a little worried about what i have learned that there may be a situation where you call something other than a post office so you get a around some of the requirements in terms of notice to the community. could you eliminate that situation for me because changing the name of a post office to a substation or some other name and then not having to go to the community and get the kind of input that is needed i mean i get that we have got a huge problem here, i get to that

the money coming in doesn't match the money going out and i am not trying to throw tax in front of the bus except to think it's important that the liberal communities feel like they have an opportunity to weigh in and i want to make sure that there's not some ability that you may have to get around the regulation for notice and public hearing by just renaming it something different. >> we agree 100% we it's a process in place right now as a matter of fact we just finished the federal register notice where we will provide public input, public notice and public input on any changes to access we make. we know the postal service especially in the rural areas is very important and to your point, we have got about cost and benefits. we won't do anything to hoodwink the american public that we. we are proposing in the federal register a top-down approach

that assures fairness sood you don't have won a state that's going gung-ho and another that doesn't take a look at it. it also assures we make the right decisions and senator begich we were talking of the importance of what we do in alaska, and i appreciate in the missouri and arkansas we have gotten a lot of the rural areas, too said you have my assurance we will make it a very fair process, people will have plenty of input and makes the decisions and make sure we reach out and send anybody the screen to be effective post cards will go out to customers and we will have a hearing and discuss and take their input. >> i want to compliment you on so many pieces, so many parts of your legislation i think a lot of it is very, very strong and i know how hard you worked on this and i do want to compliment mr. donahoe i think you're trying hard and difficult circumstances to figure out how to put the puzzle together. i do feel very strongly if we can say six days it is important to the integrity of the product that we have which is the united

states postal service six days a week is going to happen and i worry that we are going to diminish the ability of the business model to survive if we start cannibalizing it by going to five days so if there's any way that i can work with you to say the six day delivery i sure would like to do that. >> i'm going to go back to the negotiations that taken place between the postal service and one or two of the unions going forward as part of it as well and our ability to help them in other ways to compensate for the -- the savings is a number between 1.7 billion, and roughly 3.1 billion, somewhere between there and that's real money. >> of one to come back and before i yield to senator begich for closing questions just a clarification, in your view of what would still be provided on the postal world where there is no saturday delivery would include people could have a box,

post offices would be open. what did you say about express mail? >> we would keep the post office open, we would have post office box accessibility and we would deliver express mail and run the network so the mail coming for the network, payments and remittances for credit card companies and what not would still run so monday it would be delivered or in some cases if people have what is called color service and they would have large facilities for that mail. >> thanks very much. >> mine is just a clarification and in a statement. i call it what you said to senator pryor with of of 30 miles or within. as you know in alaska 80% of the area is a long road access, so i'm assuming that is part of the equation because when we did the air service there was the great debate we would cut off the surface to get to the hub to the next in many cases it is hundreds of miles away and there

is no road to get there so you recognize that -- >> in alaska presents the situation been hit with the universal services similar to hawaii that we have to take a different look as we work through that. estimate as to send notifications to the folks i know everyone gets mail and material in the mail and they don't pay attention to it until something bad happens and then they say i didn't realize that was happening. and i would send out a postcard and it would say closing your post office, and i guarantee you will get 100 per cent engagement otherwise if it is just a regular we are notifying you of the post office situation and change an operation here's what will happen. they will set it aside and sit down and read their catalog for the day. islamic maybe we will use the code click here to find out what

is going on. >> i will just tell you -- >> if anybody come plans of going to tell them you gave me the idea. [laughter] >> i will give you an example i was invited to a meeting when i was mayor and was about a land use issue no one was going to come out or because so many months away to the flyers and out of the neighborhood is learn how your taxes are going up so they had full capacity and the local council members and said your up front, we are not. and they would talk about the land issues and people would refuse but they got fully engaged. >> thank you for using the mail. we appreciate it. >> and they can't deliver it on top of that. >> thank you. >> senator, thinks for being here today and being an active participant. we need your participation so thanks. that's going to do it for the first panel. thank you very much for joining us. we would appreciate your response to those.

thank you. islamic mr. chairman as the panel is coming up, do we have a vote at noon? >> initially noon. it's moved to i am told 12:17. so we have the opportunity to hear the panel, second panel, and probably have to break off at 12:dirty. >> okay. thank you. [inaudible conversations]

>> find your seats, please. and i will ask those who are planning to leave to go ahead and make your way to the door. i'm going to briefly introduce the witnesses for the second panel. if you didn't catch it, the vote has been moved from noon to about 12:15, and i want to complete the testimony for this panel before we have to break. we have a vote followed by the respective caucus meetings but i

want to finish this panel and have a chance to ask a couple questions and then we will move on. our first witness on panel to is margaret and we welcome you. the director of accountability and compliance of the postal regulatory commission, ms. has also worked on rates and classification of the commission and served as the lead postal auditor at the gao. next postal service inspector general mr. williams is the second independent inspector general of the postal service is that correct? before taking on the job, he worked as a deputy assistant administrator for the aviation at the transportation security administration. he also served as inspector general at five other agencies.

next is cliff guffey. how long have you been in office now? >> [inaudible] >> as it seemed longer? [laughter] -- [inaudible] >> you have had a full year. congratulations so far. i know it's not easy. before becoming president mr. guffey served for nine years as the executive vice president and a senior top leadership positions since '86 and started his career in the postal service in 1971. next is marks strong the president of the national league of postmasters where he has held leadership positions since 2006 i'm told. he is the postmaster in arizona we could use some sun around this city and a couple of days we will get it. finally, we have jerry cerasale

for the direct marketing association. mr. cerasale has a long history working on postal issues including stints at the house committee on post office civil service and the legal staff of the postal service and postal regulatory commission. it's great to see you. thanks for coming today. full testimony will be part of the record. please, proceed. >> good morning chairman carper, remember brown and members of the subcommittee. thank you for the opportunity to to present the views of the u.s. postal service financial crisis. mr. chairman regrets being able to testify personally today. she is presented comments. i ask that the chairman's comments be made a part of the official hearing record. >> without objection. >> the united states postal service will include its year and will not have sufficient cash or authority to pay all of its bills. the commission analysis review of the postal service request for the rate increase from the

postal service cash flow problem is related to an overly ambitious requirement for the postal service to refund its future retiree health benefit premium. over the past four years the postal service has paid $21.9 billion to pre-fund the benefits. all other things being equal without the pre-funding requirement, the postal service would have achieved a small net profit over that time. instead, over the last four years it has accumulated losses exceeding $20 billion. this year it will exhaust its authority and anticipate another multibillion-dollar loss that will leave the agency insolvent. german carper you proposed legislation to address the crisis and build on a postal operating model of the post of accountability act. the commission supports the fundamental approach of your bill and addressing the financial crisis as well as longstanding issues related to postal service funding of the pensions and future retiree health benefit. the strategy is grounded on

objective expert analysis that incorporates the best practices of business and government and previous studies. the commission appreciates the bill provides a regulatory oversight of the mom products and services that may be proposed under the flexibility to be provided to the postal service. this will promote growth and innovation while protecting the public interest as it is the case with coastal products and services. the commission also supports modernization as the allies reprocess to make it quicker and more robust. the requirements for the postal service to respond to the issues and recommendations in the advisory opinion is an important improvement which may be further strengthened by requiring the response prior to implementation of the changes. the gold altar the opinion process to produce decisions within 90 days from the date of the postal service request to the commission. under the current all the commission evaluates the changes in formal hearings on the record that are subject to the

administrative procedure act protection. this proceeding can be time-consuming. the proposed legislation with the opportunity for citizens, mailers, competitors and other parties to octane information from the postal service and test the service resumptions. as a result the commission would be able to produce its opinion more promptly. however the detailed analysis and extensive outreach of the recent advisory opinion on the five day delivery would not have been possible in the 90 case. the commission hasn't conclude what is the 90 day limit. the postal service is also advised in the near future the plans to request an advisory opinion related to the closing of the large number of post offices nationwide. the commission understands the postal service need to address the network to the changing demand and its evolving capability. however the requirement of effective postal customers be properly notified and evolved when the postal service considers closing the retail office they depend on to read the postal service proposed

revisions to the rules for closing the consolidating retail facilities. the commission provided its comments to the postal service including recommendations to better ensure customer's ability to offer input coming from the evaluation of the affected facilities and coordinate the discontinuances and the availability of replacement retail services. i would like to reiterate the commission support for elders and the postal service financial crisis as outlined in your bill. congressional action to address the retiree health benefit issues remain the key element of any reform effort. effective oversight is vital when the entire system is under such great stress. the commission will let have transparency and accountability and promote positive change and adequate service levels needed to keep the postal service vital and relevant that concludes my statement a bye would be happy to answer any questions. the chairman could not be think you very much for your participation. give our best.

>> i appreciate the opportunity to discuss the serious financial condition of the postal service whose leadership the anticipates being unable to meet its financial obligations in the fall. the postal accountability and enhancement act was crafted to incentivize the postal service to adopt a volume driven infrastructure. it also required the refunding of benefit plans of the screamers from aware they have been subject to the wrongful overcharges. consequently the resulting payment of 90% of the $20 billion in the past four years. this causes in flux structure crossed and burdensome debt. the contaminant infrastructure optimization are under way it will take time on those numbers large-scale actions were undertaken simultaneously which could outstrip the management ability to control optimization and avoid unintended consequences including service

disruptions. so what is needed? in addition to benefit reform, postal service optimization of plans to post offices and it minister of infrastructure my office has recommended the conversion to the easily with a letter carrier routes for effective management. flexible rules managing the a bin flow of mail. a comprehensive delivery point strategy maximizing the curbside delivery and cluster box facility. the district offices simplification of the acceptance and pricing growing the value of mail and finding the postal service's role in the digital age. the digital age is continuing to disrupt many communication industries, the technologies provide americans low-cost instant communications, sophisticated data organizations come search engines, hyperlinks and mobility. however americans need stronger infrastructure to cope with serious collateral issues and citizens would benefit of the postal service could support

americans and addressing the emerging confidentiality, security, dependability and privacy problems of digital communications. partnered with federal state and local government agencies to provide that each government services and post office windows services for more complex transactions provided safety net for those left behind by the digital revolution center carper's bill proposes allowing the postal service to provide mom postal service as utilizing digital infrastructure consisted of public interest. the bill would provide the postal service an opportunity to find its role in the digital age. the postal service aside more than $300 billion in cash to meet its obligations. additional contributions of $55 billion will result in a 100% pre-funding level. it doesn't include the overcharges documented by my office and others if the overture to return to the

funding level will exceed 100%. a lot of the funds are being reexamined in the action conference and the postal service could explore an option of clarify increase funding requirements to be inclusive of assets. the purchase price of the postal service real estate is $27 billion of the fair market foley was even greater. the postal service owns a real-estate and premium locations for example to the nearby national postal service has $47 billion but the assessed value of $304 million. if this is an example of the fair market value tax payers are well protected and a surplus of access would likely begin of an over to the treasury of the postal service were shut down. there are provisions that may allow the postal service to work to fashion an appropriate arrangement to recognize the assets and the obligation.

against the backdrop the postal service continues to be billed the $11 billion every year for every ty cherry obligations instead of taking the cost of the fund created for that purpose. as i testified before, i agree with senator collins colin september 2010 for the change of copulation as the postal service pension fund payments. failing by opm senator carper's bill to require the recalculation to correct the mistakes and balance the account is desperately needed to stop the crippling payment. there's an overwhelming need for substantial objective review of the benefit plans and payments this will allow construction to clear, fair and accurate financial map for the postal service future course otherwise the postal service will be build into insolvency weigel over funding its benefit funds. thank you. >> thanks for your testimony. thanks for the work that you've done and continue to do.

mr. guffey, please proceed. thanks for joining. >> and cliff guffey president of the american postal workers union. i am pleased to participate in the hearing today with the representative margaret cigno and inspector general williams who have through their hard work dedication and leadership, much to preserve and protect the postal service. as a chairman of this committee knows legislative relief is necessary to restore the financial stability of the postal service. the p.w. appreciates the leadership shown in proposing legislation there will meet the postal service critical need for the immediate financial relief. we strongly support and the entire coastal communities strongly supports the proposal to permit the postal service to use more than 5 billion each year from its overpayment in the civil service retirement account to meet its obligation to refund postal retiree health benefits and pay workers' compensation obligations. it bares emphasis that this is not a request for a subsidy or

bailout of the postal service. the postal service says been dealing with the challenges because of the decline in mail volume. we are confident under the leadership of postmaster general donahoe and will continue to do so. the exhibit to the testimony is a chart that shows the postal service income for fiscal year 2007 through 2010 as the chart shows during this period that included the most severe recession since the great depression the postal service had income excluding the health benefits refunding payments of more than $600 million. and only of a government agency could they refer to that as a little amount of profit. that's profit. this was achieved by the postal service through aggressive cost-cutting measures. over the past three and a half years the postal service reduced the work hours by 245 million hours and cut costs by 12 billion. it will cut another 30 to

40 million this year. the historic collective bargaining agreement concluded in the postal service would save the postal service billions of dollars and provide the necessary work force and work force flexibility. thus the postal service has shown the capacity to sustain itself during difficult times of declining volumes when it cannot sustain is the burden of the unique in a reasonable requirement that a profound thought health benefits over without access by which it has overfunded. from 2007 through 2010 when it would have had a financial surplus the statutory leave required payments for the health benefits totaled nearly $21 billion. in fiscal year 2010 the payment for their retiree health benefits consumed 8.2% of the postal revenue. with additional payment of 2.2 billion to fund the retiree health benefits for current

employees augment the postal service was required to pay 11.5% of its revenue for the health benefits. these payments deprive the service of the capitol needed to improve and maintain the distribution networks and develop and launch products and result in a debt. i want to emphasize we very much appreciate leadership of the german addressing the issues over funding and the health benefits refunding. we also appreciate the fact senator collins introduced legislation that will address the issue. from the retiree benefits requirements and encouraged the fact the members of the house also introduced bills that would deal with these problems. there's a broad strong consensus in the community to support the measures. there's also a broad consensus to support proposals to revise the provision on offering products to permit to partner with state and local governments to offer additional government

services and facilities and accept for shipment. we also support to help it get the changes and communications while continuing. the measures will help the of revenue and help maintain postal network that can deliver services to every part of the country. where the american flag flies at a rich community in the country and to take those flags down and replace them with a grocery stores or gas stations should be the last alternative into those postal facilities. we will help any way we can for the legislation to address at the expense of the employees. i will be happy to answer any questions the community may have >> thinks mr. guffey and you are recognized please proceed.

>> members of the subcommittee, thank you for inviting the national postmaster general to the to his authority. it's a pleasure to be here really commend you for holding the hearing. my name is mark strong and i'm the post master of arizona, a very large urban post office. i'm the president of the league. i'm originally from montana and served many small post offices. founded in the 19th centuries the association that represents postmaster's through the united states. dixon and how to address the postal service financial crisis it is critical to understand why the postal service finds itself in the position that it does today. it's not because of electronic diversion of mail but electronic diversion has slowly been pulling some mail out of the system but that has been with us for decades. electronic diversion was a factor 30 years ago, was a factor present during the recession and will be a factor for years to come. electronic version has been and is the fundamental factor of postal life and hasn't changed much in recent years.

the largest factors that caused the crisis are the recession and the fact that the postal service has to make annual payments to refund the retiree benefit obligation even though there are surplus funds in the pension plan. today the postal service is still running a deficit mostly because of the retiree health benefits payments we are making. we wouldn't be running the deficit if we were not paying 5 billion plus into the health benefit fund despite the fact that there's 50 to $75 billion surplus sitting in the pension fund. senator carper's bill and senator collins bill would fix the problem and we strongly support those efforts. in fact, the lead was one of the original supporters of senator collins bill. without substantial relief in this area the postal service cannot continue as a viable entity for long term. no business of any type in any part of the country could afford to pay $5 billion supplemental

annual income tax as competitors do not pay and remain viable. one reason the postal service should not do is close the small post offices. as senator collins will tell anyone, small rural post offices are the keystone of many communities and keeping them open costs the postal service a very little money. according to the datacom and we recently checked this, the total net cost of the 10,000 smallest post offices morgan once third of all post offices in the united states is less than seven tenths of the total cost for the united states postal service. this is nothing. it around in iraq in the spreadsheets closing small post offices does not save the postal service in the significant amount of money but it is one of those cost saving measures that is popular with middle level postal officials because they can look good and give the impression that they are driving large costs out of the system. closing post office is not popular with american public as

indicated in my testimony according to the 2010 gallup poll, 86% of americans oppose closing post offices. this is overwhelming nation wide endorsement of post offices of consistent with the 2009 gallup poll which showed 88% of the public proposed closing post offices. i've shown in my testimony few other government services rank this type of importance in the public mind. the reason for this is that as detailed in my testimony come post offices and post masters do much more than sell stamps and deliver mail. they perform all sorts of other functions and are the glue that binds america together. although it is sometimes difficult for urbanites to understand this, those words, the glue that binds rural america to get there are not empty words or useless rhetoric and they are not gross exaggerations. they are the truth. if you allow the service to close substantial numbers of the post office then you will

seriously hurt america even if the postal service could provide adequate postal service which helped them which it cannot do. one way to maintain is to allow them to sell other products such as the office supplies in order to offset some of their costs. senator carper's bill would do this. this has a minimal problem of competition in the private-sector since there would be no local competitors in most of the rural areas. thank you for considering our views and i will take any questions. >> please proceed. >> good afternoon, senator carper. >> we have about 15 minutes. >> a leading trade organization for markers and nonprofits reaching consumers directly members represent about 78% of

the mail and 80 present of the postal service revenues. they're an important communication channel for all of the members and those of the magazine publishers and nonprofit mailers and the 21st century. and it's in the financial crisis. we agree with you on what you've done on the pensions, the pension obligations for every hour that is worked in the postal service has been fully funded by postage that we've paid. we also pay between 50 to $75 billion in the pension obligations for the hours worked before the postal service was ever created and that is a tax base also overpaid in the payments and we asked these overpayments be used to offset the retiree health payments that are currently harming the cash flow positions in the postal service. we think the legislation should require the governors to use any tension over the payment refund for the retiree health benefits

until those legacy costs were completely funded. the facilities we agree with you on the post act to give the postal service more flexibility and the use of the kiosks and others of retail services to the american public. we also supported senator collins as the coal location of the postal facilities and other retail outlets and vice versa. kuhl locating with federal, state and local governments as well. we support the positions on the post ek and we think the postal service should work with and partner with the private sector expertise on those products rather than starting out from scratch we want to commend the postal service trying to and the summer sale of the code

postmaster general will keep up and bring some more. we support the provisions in s. 353 requiring a cost-benefit analysis for any new meal preparation requirement. and if that cost-benefit analysis shows there is a shift of cost to the miller we think that that should be considered as a rate increase under the cap there are concerns with the post act. first, we think that the powers given specifically to the governor's should not be delegated. there's a reasons they have persons appointed governors. delegated we also believe that the 45 day decision requirement on the postal regulatory commission for the transfer, just for transfer of products from the market dominant competitive and vice versa is

short. transfer between those provisions can have serious consequences for the members. we believe that ending the period would not harm the postal service because that product is still being offered looking at the transfer. finally the postal service has to deliver 150 billion pieces of mail rather than 250 billion we can't afford that capacity, and it has to be done today and not tomorrow. thank you. >> thanks for your testimony in a think all of you for the valuable testimony. i just wanted to share on the subject of whether or not the world has changed in the electronic media i was just over in afghanistan and pakistan senator begich and i know scott

brown and i have been over there a year or so ago. i think about what the world was like when i was serving in southeast asia during the vietnam war and, important to us and the squadron how important it was to us just to hear from our friends and families back home to get letters, cards, we were stationed in california overseas and on the san francisco chronicle about five days late to receive time about four or five days late and when i was over in afghanistan two or three weeks ago i saw the soldiers and sailors and airmen and marines skyping. they can access this in francisco chronicle through the internet or "newsweek" and pay their bills electronically. the world has changed and continues to and for us hot we

have to have a postal service. it doesn't continue to add to the budget deficit and the idea that with or of this people opposing closed office at the to post offices at least that many people also oppose running huge budget deficits and they want us to do something about that and what we have to do is come up with a way to continue but at the end of the day to not add to our budget deficit the next ten years i think we can do that in the challenge to figure out working together how to do that and think outside the box. let me go to senator begich and then i have a question but i ask no more than five minutes. >> i'm going to make some general comments and because we have a vote in our title the schedules i think there is a recognition between the last panel and this panel, and to use your words they are the right size for the times we are in today and that is a challenge and i think the bill that

senator carper has brought forth is a good step. there are obviously tweaks that need to be done. as a matter of fact mr. strong, was in alaska not long ago meeting with the postmasters. it was an interesting -- they had no conference room so we had to do the meeting in a restaurant bar which i thought was appropriate because we had a great discussion at lunchtime but what was good is the talk about it especially in alaska, and i just want to really say to all of you that you will find me in trying to solve this problem and on the pension issue i've dealt with this when i was the major we had the free pension programs police and fire, two of them were underfunded, and we've restructured and the city no longer had to pay a payment because we've restructured it and became more satisfied in the long term benefit they received there was a win-win all the way

around and they were highly unionized police and fire folks but it was painful getting their to be frank with you but at the end of the day we figured out and worked out better so i think the approach again mr. chairman there's going to be some work to do it that's why this hearing was good to hear from you. my son and ii like having him collect stamps because there's history behind each stand and last thursday went to the post office website, ordered some first edition stamps and they came on monday. when you think about that, that shows the efficiency you have to organize it, package it, put it in, deliver it and we got it, and that is just an amazing thing, stamped envelope on the

can stand from here and a village in western alaska is amazing so i credit the post office. thank you mr. chairman for allowing me to say a few words. >> we look forward to working with you on these issues. one question and this will be for maybe mr. guffey and mr. strong to members were directly with postal customers every day as we all know? what do you think the postal service needs to do to reach out to customers with their individual customers or the biggest out there to attract new business? what do we need to do to attract new business? >> one of the problems we are facing for many years as a world work rules have gotten in the way to prevent the post office from staying open until 5:00. there's a post office and at 18th and king but they closed at 5:00 the people bringing it on the mail packages and what have you just miss out.

they must go to one of our inhibitors. we changed the rules to allow the post office to stay open longer without the payment of overtime and doing certain things. we also lowered some costs of the new employees and longer-term benefits so that the postal service can open and where there are clerks working can lower their costs and keep the post offices open longer in the general community rather than shutting them down because the cost factor in other words we try to help the cost factors. we must be -- we lowered the cost of processing inside plants. we tried hard at that so the big mailers could keep their discount and bring more mail to the post office to keep the cost down. the man and women of the union are very concerned about the post office and they want to help it to be a viable institution and the overwhelmingly voted to do those types of things.

>> congratulations, thanks. mr. strong? >> a number of things. i had the privilege of being on the panel a couple of weeks ago and i talked about the complexity of the bulk mail units where the customers come in and it is a very complex operation, and i think we have to reduce the complexity to make easier for the occasional user to conduct mail into the system but one of the things gerry brought up is the fact we have to look at the complexity of the window, the retail services selling the products we currently have sometimes can be a struggle only for the customer to understand but the retailers' receipts so we have to reduce the complexity of the operation as well. we already have an outreach program where we have deposed ministers involved and it is a customer connect don't reach. we need to expand and continue to grow that and get all of our employees involved. postmasters are great salesman.

we need to continue to get them into the field and sell the products we have and get them the time away from the desk to get that done. i think we can, i think we have the people to do with and the product lines to continue to grow and be a vital part of america and work at that. >> i'm going to run over there and vote. about five minutes to go so i'm going to go. thank you so much for joining us today and for the preparation and hard work you do every day to help make sure that we have a strong and vital postal service. i would like to quote who said adversity lies opportunity, and i think there's plenty of adversity for the postal service but there is also opportunity and it's incumbent on each and every one of us to find that opportunity and work together

thinking outside of the box to come up with opportunities we never thought of before and when i see my neighbor is getting of those netflix and my wife being delighted to receive a mother's day card from the other side of the world or when i see flat rate boxes the postmaster general is holding up, when i talk to folks the medicine is delivered six days a week to the mailboxes there is a lot of good ideas out there some of them realize, a lot of them haven't online and with respect to the energy cost the last thing i want to mention is we didn't touch on this but it's part of the 800-pound gorilla in the room in terms of driving federal budget deficits the cost of health care, the cost of health

care. and its minimum to beat one of the major drivers and 80% of the gdp for health care costs they spend half of that 9%. they cut into get better results. we can't be that dumb but part of our challenge is to figure out how to get better health care results for better health care results for the same amount of money and that is a issue for another day but it's an important issue as we deal with this one today. so i look forward to working with my colleagues here today. those that weren't certainly look forward to working with senator collins. we are going to figure this out. it's not going to be tomorrow or next week but we will figure this out and we will figure it out this year. that having been said, this hearing is adjourned. thank you all.

[inaudible conversations] ..

>> british prime minister, david said to answers questions from the liaison committee. he talked about the british economy of british foreign policy, including the nato mission in libya and relations with pakistan. this is an hour and a half.

>> order, order. welcome, prime minister to your second session in this parliament and your agreement to come three times a year, of which this is the first before the end of this calendar year. we have shorter more frequent visits to cover subjects and greater depth. today, it aims for chosen and the second is focusing intervention and asking you to support it. sobol come. i will hand to andrew toney. >> do you think the government can rate the secretary is this parliament? and if so, by how much? >> i think government can change

the trend rate of growth by making supply-side reports. it could make an estimate for you what i hope i would be. i notice obviously the office of budget responsibility hasn't changed the loughner to the growth, but they have said it may be possible to sort of thing could have an impact. the way i see it is clearly there is no room for a fiscal tumulus because effectively we'd have the situation and pursue a budget deficit. clearly the economy is headed monetary stimulus in interest rate or his foes they could be. so the tool that's left to government is to do everything you can on the supply-side economy to make sure the planning system is working properly, making sure that labor is working properly, to help individual sectors with changes that could hope those industries grow and that is what the growth review of the chancellor and i have been writing and to -- is all about. we took 117 separate commitments, including some that

were about cutting regulation and two to 350 billion pounds. that is the a limit growth review. as i said, i can't give you an estimate for how much would raise the growth rate by. >> i think there is a consensus that it is absolutely crucial if you give companies capacity to enable written. but that bank of england has fallen. when will it use the power of its own to ensure there is an increase? >> what i say is the minority -- the reasons are disappointing, but they only go up to march and of course the agreement that we reach with the banks, project merlin, which was all about increasing bank lending really runs from the whole of this

year. i think you should judge this across the year rather than anyone's given month. that agreement was 190 billion pounds of new credit for 179 billion last year and for smes, which i think it's a critical piece of this coming 15% increase to 76 billion pounds. that was an agreement with the banks and their cited the agreement is to deliver the extra gross lending. clearly we need to make sure that does happen. >> quite clearly it is too early to come to definitive judgment on how successful the project has been. however, certainly there is still a considerable body of anecdotal evidence coming in the bank lending hasn't improved. what is the government's position if in fact a level of bank lending continues to drop? and what measures of it looking at to rectify that?

>> or two answers to the question. one is for which you do with the bank than fulfills their cited project merging? the other side was that we will not introduce further bank levies, taxes, bonus taxes and all the rest if lending cases for coming. that's the point. so let it fulfill their cited the deal, including the government wouldn't have to fulfill its side of the deal. sites are not coming they are clearly other steps we could take. assembly authority taken. obviously there is the enterprise growth fund, which is a classic sort of loan guarantee to try and increase bank lending. their other measures you can look at on that site, but i've always believed the project merger is very much time to try and settle this argument that the banks. i don't think it's construct

good to have an endless series of new battles to fight taxes on the banks at the same time is getting an economy to grow. let's try and have my lending for the banks, lower bonus payments this year and last year. a set of taxes on the banks and guaranteed about tax revenue for the banks. i think it was a good deal, but we have to make sure the banks to their cited the agreement. >> as ownership in a part in this? >> of course it does. and of course the things is a further site to this. of course as owners of the banks, we have an influence there as well. that is the case. of course that the case. as i said come in the first to try and make the project work in the way it was intended to do something after all the banks headed into believing they could find a gross amount of money to large and small businesses and

indeed saying they wanted to do that. so i think we should judge it across 2011 for the progress remake on that front. >> i would just point out that the net increase in lending is possible to increase the vote landing, but its effect and the amount of money flowing to business. >> the problem is if you target -- the problem is the target local arrived at more businesses justified at the time they want to write down debt and repayment. and i think targeting is something that's actually more useful in terms of making sure the banks are prepared to make fresh commitments. otherwise they could meet net ending targets by ensuring firms not to pay back the money. >> it could also be met by some deciding there is no point in asking back anyways.

>> well, i'm a constituency mp like you are in it lots of examples of people coming to me and saying i never preach my overdraft limit. i've never cause my bank and a troubling yet i'm not able to get the loan. so i took a recognized as a problem. that is why was instrumental in getting the project underway. i think this is the first step we take, combined with the loan guarantee we've increased and i'm not expecting these things not to work, but absolutely sure you're concerned that bank lending is a key to helping get the british economy moving in a consistent and sustainable way. >> i just finished with a a question about export and uti? if the government policy is to succeed given the state of domestic power is essential to boost ports, why is the

government cutting the budget and u.k. t.i.? >> first of all, i totally agree with the thought underline your question which is we've got to rebalance the economy. we need to see growth coming from manufacturing, investment, exports, rather than believing we can briefly the economy and the basis of property, government spending and a consumer boom. and the good news is over the last year can export is up 16%. manufacturing 5%, business is up 11%. clearly like many other parts of government has had to find efficiencies. we've had to make savings across government in order to fill in a huge budget deficit and start to get to grips with that. what we have to do is maintain numbers in ukti's network which is the crucial part. the overseas network where we have over 90 people in china,

over 80 and india, for in japan. those numbers are maintained. all of the savings are for reducing corporate spend in advertising. also this is an area i ain't a close personal interest because i believe the trade agenda is so important that the connection that i got stephen green who is a very respected chief executive of hsbc, a bank that didn't get trouble in the boom has come across to beer trade minister, eager to the presentation recently with the number of cabinet ministers about buddies they need to do with ukti and the export credit guarantee department and i think they're going to be on the really superb political oversight leadership from him in the years ahead, which is good news. >> i want to talk a little bit about bank lending. he said that the bank lending was right target, this case and i'm quoting the mail, this is

completely left the bank off the hook. it's perfectly possible for the growth funding target while with growing businesses. do disagree with them? >> all i'm saying is saying is you can target the growth or you can target the net. i think it's better to target -- to get a commitment about the gross lending, the amount as it were out of the door in lending to large and small businesses. if you did the same, you could find -- you might find that the figures were effectively being massaged by encouraging firms not to pay back loans, even when they wanted to and therefore the problem is small business can't get a hold of all the money. that's the problem and therefore i think targeting the amount of money out of the bank into this mess particularly solves this increases the right way to do it. >> well, i agree.

i agree about the sme point and i think that's usually important. the money didn't go to the start of. it didn't go between 2 million -- those who are between 2,000,010,000,000. so it's a very poor start up for your new inspiration will not get access to finance even under the agreement. why not? >> well, what you're referring to in many cases is going to be project finance, leasing and other such things, where we have to talk about encouraging banks. it's also about encouraging law firms to look or for capital goods. >> honestly, this is your surgery and my surgery and we can't access them whenever therefore we cannot access finance to grow. >> yes, what i'm saying is at

least other arrangements as well as the banks. but we also have of course the enterprise finance guarantee, while lending up to 600 billion to around 6000 smes and over the next four years another 2 billion pounds. so we are trying to look at all of those. i think also export credits is another area because a lot of -- the big picture thing we should think about is if we can move from where we are today, one in five of her smes exporting if we could move that to one of four smes importing would be 14 billion extracts for us. again, a lot of that is about investment and capital goods, some of which are about bank lending, some leasing and other financial products. >> were talking about the very small start up, which cannot access finance from the banks and under the project improvement has no -- you have

none at all. >> you're only looking at project mergers. the other government policies, whether the loan guarantees it will be given the budget where you think anyone who has looked at what can you do for small firms, startup firms have set will be dated in terms of investment allowances and the capital formation credit. those are quite powerful in terms of trying to get money to small business. we specifically went to on the venture capital organizations. but other things can we do in a budget that would help? are quite powerful. >> what can i just come back as well as the sanctions. the sanctions you might they are attached, might be tougher on their bonuses. that would get them to land.

what are the sanctions you think about, given the actual landing at gun and immediately we have too look at the sanctions you have in your mind? >> the sanction -- why did they sign up in the first place? why did we suggest you stand back and think about it? the banks recognize is extremely unhealthy and a model competitive market economy to be in a permanent state of war with the politicians on all sides of the house. it's an extremely unhealthy situation. an endless debate going off what bank taxes some of these we can introduce. we must reach an agreement that says we pay a lot of tax. we're going to pay even more in tax. or paying your bank levy which has also gone up, but what we want to do is get back to the proper practice of lending money and oiling the wheels of a market economy. so let's have an agreement where we promise to increase gross lending and you say you're not going to introduce another tax

on the rest of it. that is quite a sanction because it was an agreement and they have to be on their side of the agreement. i think what, of course argue for a different approach and say the government should manage the bank itself. i think there would be danger is frankly because we are politicians, not bankers. you can have even more on the loan guarantee schemes. that's another route. i think this project is the right way to do it, but clearly it has to be judged across the air. >> can ask you a more general question on growth because it's now not just blow the french and the germans. on the last quarter and managed to get the greeks as well. can you say to me what evidence you've got to show that your approach is working?

>> well, the first by meme, statistics is actually the americans. that's an important point and also had a sum of the country. actually, it was that had of portugal as well. but we are going through an enormously difficult process of rebalancing and economy that did have the most over indebted banks, the most overleveraged households, the most overbroad government, the most out-of-control immigration, the most fast increasing government spending. remember three quarters of growth had been coming from government spending, housing finance and immigration. that's a sustainable model. so when we're sitting here will have to rebalance and try and bring about a situation where

growth comes to manufacturing, exports, technology, investment, rather than pumping up the bubble. that's extremely difficult because obviously you are seeing a reduction. you are seen a reduction in public-sector employment. and so we need to generate an increase in your planet in order to give people the chance of a job. the good news is over the last year there actually 400,000 more people than there were a year ago. i'm trying to make a general point. the rebalancing of the economy. but the fact the economy is now growing in the investment manufacturing exports are growing, it don't take it for me the government and the bank of england and the oecd has says there are signs of rebalancing the british economy and that is a healthy sign. what we have to do is try and secure and expand the growth as part of the bank lending we've been discussing, but also the growth review. as i said there is a direct

fiscal measure you can take because we've inherited a situation where the government was supported. interest rates pretty much as well as they are so we've got to look at what can we do to help supply a sign that the economy? is a sad, 117 commitments. regular proposals would cost 350 million a year. a presumption in favor of sustainable term of 50,000 new apprenticeship and the next state growth review is infrastructure, and mid-cap companies, look at the power of open data to create new businesses and all specifically look at the rural economy. >> a very final point is committee considering whether it should be done because of our performance look a bit small?

it feels to me a lot like word noshing growth, have massive inflation. it feels like an era of taxation where the people are separate. >> well, i don't accept that the economy is a growing. and the point i made -- the main point about moody's and the credit rating, if you look at what has happened to a really key indicator in our country, which is happening over the last year, it's actually followed in the u.k. by 44 basis points. if you look at all of the european countries, particularly those with question marks about that, it's up by 316 basis points. kris 544. my view is if we hadn't take steps to set out a credible path of deficit reduction, u.s. and british interest rates go up rather than down in the whole

rebalancing picture of manufacturing can export investment, business growth would've been absolutely laid out flat. that i think is the key judgment we had to make and i'm sure it was the right judgment. >> senator, the jobs are important to delivery. top work program or did the right job in the right space. if that case number -- because it changes you've made in the best and send them the cbi forecast are much smaller over the next few years. but there's a mismatch in the number of people that's actually available. >> well, the zero pr forecast unemployment will rise next year and every year after -- as i said, the date picture is we are

trying to other rebalancing economy are inevitably whoever was sat here now would be seen a reduction, but needing to generate a growth in private sector reclaim it. now we have got 100,000 more people and worked in the u.k. buddy except what you're saying, which is as we put in place this big for program, the biggest seen since the great depression, we've got to make sure that businesses are still growing and taking people off. and i think at the moment that is happening. but i don't accept that it's all about what jobs are available as people come off welfare because what's different about the work program is for not just hoping if you like the friction of the unemployed, people have become unemployed and need a lot of jobs. we are trying to help people who have deep problems in terms of

literacy, skills, self self-confidence, mental health. we are trained to help all of those people. and for those people, they've been left behind in the past and a welfare program that really hope some will find jobs for many people to do if they get detailers support they need. >> the president clearly -- there's implications for individuals. there will be people who will not be able to say about because of the market of the jobs, yet they have potential to also benefit and gives them a lot of money. with government going to do for those individuals? >> the first thing is we'll help them to get a job. at the moment they've been left. >> it's not going to help them

get a job. or some people for the millions who often benefit from one to another. there's much income which is quite insidious of the labor market. >> let's first of all question that assumption. over the last year there's 47,000 more people i work in scotland today than a year ago. again in the north west durham are people who work than a year ago. so the idea that jobs growth has been confined only so one or two parts is not the case. that's the first point i've made. the second point is if you can get someone to help in training they need so that they are no longer incapacitated from work, then they should be treated the same as someone who is seeking

what the plans involve. but i'm more confident and that that if we give people that help in training that there are the jobs. there are 482,000 across the economy. and also the key thing is this hasn't been tried before in terms of proper payment by results. so the organizations that are doing the training are going to get paid more for dealing with the hard cases. now that hasn't been tried before. i think it can make a very big difference. and again, he can't find a job genuinely are available, you should be receiving benefits if you need them. >> the point as a result of changes -- >> as a set, if someone is in capacity -- an equivalent, they actually can be trained to the

extent for the investigation says they should be on the benefit, they should be treated the same way as someone who is actually seeking work. they should be actively seeking work. but of course the whole point of the changes as people who genuinely can't work should be supported and generously supported throughout their lives. what we have found is that you go through people on what was incapacitated, you find many people -- they're those people generally incapacitated who is a compassionate society we should support and make sure we look after. the second group is those who cannot work and offer rails treat them can get positions where they were. the third group are people who shouldn't have helped the benefit in the first place you should be actively seeking work. they think it's the responsible thing frankly to go through all these people.

>> let's move on. >> trimester, the government inherited a very high level of youth unemployment. but steps can the government take? >> i think this is a very, as you say, severe problem. what kind of want to understand the extent of it. there are just less than a million young people ages 16 to 24 who are unemployed. if you exclude those in full-time education, the unemployment numbers include. between 607,000 young people cannot find work. and the way i put it if they think we have a problem, a welfare problem and an opportunity problem. as i discovered rios of a government problem. the school problem is there's too many people going into the labor market you don't have the necessary skills and qualifications to work.

we've got to fix the problem of people leaving school out of the qualifications. the welfare problem is that in some cases people have been able to get onto welfare and find themselves better off than welfare than they would be in work and so that the smith reforms were about to make sure you're always better off in work or the opportunity and this always happens tragically in a recession and after a recession is that it younger people harder because the new jobs are coming on stream. so their government does have a role to expand apprenticeships, work placements and that's exactly what we're doing, putting firepower into the area. we have had a problem of looking at 16, 17 euros who are unemployed and need help. this sort of falling between the crack. one of the things we're doing is making sure job centers, department working pensions has

the money and resources to focus on those people. but in time, part of this is raising the participation age and education and training from 16 to 18 in making sure we make the opportunity available to other young people. i think that's the way we have to do it. >> in holland, benefits to other people are peeping municipalities and if they spend less than the money allocated by government they keep it and if they spend what they have to pay the price. we simply brought the legislation in a transfer of the attitude and approach of the municipalities to seek government processing in the center and focus much harder and making sure get were up to age 27 you can't get work in training. other changes to the incentive system that can bring about in this country to lead us to join the dutch and having the lowest number of unemployed young people in the oecd. >> am not certain about the

dutch are doing. but we have in common with them is the universal credit system, because it raised the clay works right from the bottom of the income scale in the bottom of the lowest numbers of hours worked all the way up, it means however few hours are working, working a little bit more will always mean you keep a bit more income and because it basically interact between the benefit system and the way -- and what you're getting in work, i think you have an enormous incentive. should we do more to try and recognize some of this problem is they've done in holland? i think when we have given the chance to run more services on welfare, they've actually found it in their interest to really get the welfare bills and costs because they never have to pick up all the costs. i think it is an interesting agenda. but are certainly study. >> they also provide opportunity for vacationing stream from the

age of 12. to think there's a case for us extending educational opportunities at an earlier age? >> inc. having those options available but we are to us to the wolf report. in a nutshell what it was same as there've been too many poor level qualifications that we've turned that young people and they start them up and i think it's basically saying two things. one is that to make sure standards of vocational qualification are high and meaningful and worthwhile and the second thing she is saying is you really mustn't give up on young people having the core skills of english and math, even if it means that there's almost no job in the world that doesn't involve having the rigorous reporter. i think we should follow that and i also think our plans in

terms of putting money into university technical colleges, which should be high-quality schools that would have a very prestige level for people who want to take a big part of this as well. >> at last prime minister you acknowledge that we need to spend more time with advisers. >> i have. i even had a big dinner. i've had meetings with him. >> ayrshire baccalaureate. the government put down some positive things. for example, creation and innovation is followed the previous government. what else are you going to do to help development competitiveness of british industry by applying? >> the first thing was the big picture decision was to not cast

in cash terms the budget door having to make cash sales to things that are more politically penny fuller, for an end for policing budget. i think nonetheless the right one. i would add into that a science-based policy. i think introducing the 10% corporation tax rate for companies that develop intellectual property and exploited in this country. the mention the technology and innovation centers. we've also put specific money into things like synchrotron and capital investments. >> the physics between 2004 and 2012 is harping of its funding. these are serious cuts. it's incredibly important for

the future. >> obviously science and technology she makes decisions about the individual level. by complete chance i met a position last night and i said i know i'm going to be questioned about this report. neither one of them challenges towards highly specialized areas as they make our application, they've got to make them relevant. they can expect to get money because it's an important area. they have to prove the worth of what they're doing. >> you can't just leave that. i'm a firm believer and i wouldn't want us to choose the priorities. what i would say to you as one of the places of evidence we produce very clear, gap between the research councils and department of education over budget and the national scores observed that the project which demonstrates how to incentivize

young people and yet if they're not careful i'll dissipate out. >> well, first of all, there are things we've got to do in terms of the ricker and the education, which is very much on the agenda. i take the point that you make about the importance of high profile projects that actually can inspire people in terms of science. and one of the ideas were looking at is to produce than brittany sort of novell sale price for engineering from the something that happened every two years of massive sponsorship and it would have -- and what for things to work they have to have a real boost of money and status. i think by that is only one thing and it's only engineering, it's things like that that could help raise the status of a whole

area of scientific endeavor. >> final question is part of our strength is in the international collaborations we have taken a wide range of fields, particularly in the big science projects. but pretend the sordid scene has been a difficult partner because of the lack of long-term commitment toward subscriptions involved. is there a strategy that's going to take us beyond 2015 to make sure that britain and their leading scientists can stand up and be a key part of some of those collaborative actions? >> bellarmine, i did after this last conversation we had, i organized a surrogate big

seminar at number 10 and gather together the chief scientist, scientists from the highly theoretical through to the very applied through to david outerborough. so where is britain's advantage and how quaint thought it? i would say we are second only to the u.s. in terms of academic excellence. it seems we have a joint challenge, which is people do like studying in britain and the approach to science in britain because of our emphasis on basics, but we've got to maintain that bought the same time recognize that it's easier to make the case for investing in science if you're seeing results in terms of the application of science, the growth of rad, the group to and all the rest of it. the strategy should be about you got to try and do both. i think we've been stronger if

the first and we have in the second and so i think we should get quite a lot of attention to the second. but even as an oxford graduate, and committed. >> really insensibly over the course of an hour than trying to listen and all i've heard is a reference of greed. last but not least, surely the whole way we'll get the growth is by having green growth. in terms of the actual kinds of growth, it seems to me that finance trumps everything. the environment doesn't, and except as an add-on extra. haiku we demonstrate that green growth is actually invariable? >> i don't accept the approach but i can understand why. to me what we did was right at

the start was set up the green growth was a very big part of the government strategy. the growth review then comes on top of that where we're asking ourselves basically what else can we do around the economy to make sure the planning, housing, employment law, regulation is not getting in the way of growth and specific set or so the economy like pharmaceuticals. but the green growth part is absolutely there and i would say in terms of what is the evidence, the green investment bank with 3 billion pounds of new money and it is a massive massive commitment anytime in the government is having to make spending reductions. the green deal, which could be transformative program in terms of greenhouse this is going to have massive investment behind it. the renewable heat initiative adults and people have focused enough in terms of what it could mean for replacing boilers and

building of new homes in renewable heat initiative for business, residential as about eight under 60 million pounds attached to that. obviously even if they speak i think chris ewen is making a statement downstairs about the carbon budget, where britain is now leading the world and setting out tower going to get to be 50% reduction in emissions over the period ahead. so i think you take those things together, britain does have a very set of circumstances to encourage people to make investments. we don't just leave it at that. i literally pick up and said, and invest in britain, though not sure when. we've got to encourage the manufacturing premises so that cannot be made available. i totally agree with you that the green part of the growth agenda is vital. >> is so combatant, but that

aside you've touched on different things correct the green investment bank through given the chance through that ask the chancellor's to revisit in order to stimulate the economy? >> i've had long discussions with the chancellor and -- i'll tell you i think clearly we have got to get on top of borrowing in britain. i promise you i'm going to answer your question. the real missing piece in terms of green investment is much more equity rather than debt in the green investment has 3 billion pounds of money it can spend is enormously valuable in terms of leveraging and other borrowing by other financial institutions to make green investment. i think what it will be as a catalyst for green investment that otherwise would go ahead. it's the equity partner will have the real impact. we do have agreement that i

think aspiring powers as as well. if i said to you a year ago that the investment bank has 3000 -- >> how much we need in how quickly we needed -- if i may add onto this statement which i feel as i commend the places about the fourth carbon purchase. i simply wanted to ask you, we are being told the single development would be a process between the cabinet office. [inaudible] i just wonder if you could tell us what trade-offs there might have been? >> the process is basically speaking is serious and quite large cabinet committee, one of

economic affairs, one home and won a national security. the chance to change the economic. the agreement on the climate change budget was agreed between the chancellor, business secretary and quite a change secretary to the economic affairs committee. >> number 10 is always involved. absolutely. in this case -- >> my office was involved in trying to encourage a solution. >> the sticking point was obviously we want to meet as forthcoming budget and meet the 15% target and were doing that. the climate -- the business secretary and others had serious concerns about energy intensive industries and how we should try and put together a package to help them because they are being affect did not just by the

common budget buffet also changes to the electricity markets and other costs. it's very important that it does actually how climate change. you simply drive and energy intensive industries to go locate and poland rather than britain. that was one sticking point. we have a good agreement were going to deal with that. and also another part was to make sure that what we believe europe should follow our lead and going for a 30% reduction, they haven't yet committed to that. so there is a review cause in 2014 to make sure if they're not on the pathway that we shouldn't put ourselves on it, too. were confident we can persuade. i think you see a very good and green and announcements about our future intentions, but the government quite right we says make sure were addressing the concerns people have.

>> a couple quick points. one is acknowledging property. >> the economy as you are well aware, the sort of indicated in northern ireland productivity employment, economic and tvd are historically low with also got a high dependency on the public for. there are things which were discussing to try and change that. one of the things which is worrying me is the growth in the distant republic cannot tvd. we've seen an example of it just yesterday. and that will do more to her and the economy anything else. is there anything else you can do, prime minister, to counter this? >> a first of all, the relationship between britain and the republic is stronger and i think it's sort of a demonstration of that.

it can cause the relationship is extremely strong. obviously we've developed facing justice, which was the right thing to do, but we should still stand behind and support the national security council discussion or were granted an additional 200 million pounds over the coming. i think we have to make sure they're doing everything to help the security and cooperation bases. again we've got to stand back and ask ourselves, why is that young men are still committing themselves to this hideous level of violence when everyone else wants to make progress? i think we've got to make sure we do everything to keep communities together and cut off those who go through extremism. we have to ask as well to make sure politicians in order to ireland to everything they can to ensure the future. the great success from the peace process and evolution is the

elections in northern ireland or about health and education and housing and that's a great development here thingy to help encourage that and get politicians to really think of their future and they're going to build up rather than still being about constitutional issues in the relationship but partly security, part lee verbalization. >> the government supplemented oil and gas really damage the industry and investing. i think except in the government does ask you engage with them develop confidence because we were an industry that would go to a me to ask that we have

again to set the teeth tax relief in the budget proposal. >> i accept it's a very important british industry. what we have managed to discover in the north sea and they've been to apply his fantastic success story for britain. i think what we are proposing is there not least because for letting the last change was $66 a barrel was more like 100 t. now and according to treasury estimates that oil and gas sector will be full 50% higher in the coming years than a couple years ago. i think it's very definitely except that we need to discuss the setting and make sure that we do understand the tax relief

and training provided certainty they are. and of the chancery ministers are going on that issue. >> you are engaged in a company -- a major company told me last week they had three operations going before the budget. to had been transferred to africa on a major project has been abandoned and another one is scarce and review. at the casino price is not high but that they're trying to squeeze production out of the risks also high. we engage to make sure you understand -- you said please invest in our offshore industry. these come these are investing this money we can do during whether they should. >> i certainly have had these conversations. the post-tax profit per barrel will be higher in the next five years, so i don't think we've created a situation where investment shouldn't go ahead.

>> that's where the problem arises. >> if you look across the base and those are correct figures. so we have to put recognize the overall fairness in a particular time we do try to keep the fuel duty in the budget, to give households some relief. the money had to come from somewhere. and at a time when the oil prices of 113, $115 a barrel rather than where it was five years ago. >> most oil companies are not going for a price like that. >> the oil price stays at that level, the forecasts to the oil price will still predict a plus $100 a barrel price in 2015.

that will mean that those companies are still highly profitable and can afford to pay the charges set out in the budget. >> prime minister, in response to the questions on the growth in the first half of the question, you referred repeatedly to rebalancing the economy. i wonder whether you could give us a little more detail on exactly which you really need. perhaps i'm the public versus what do you think the correct level for the economy as? >> i never believe you should target a particular percentage of gdp. i think what you need to do is

make sure so you rebalance between public and private. >> the savings ratio is about 4.5%. what would be a long-run savings rate and a balanced economy? >> again, these are not -- these are not individual figures that we are forecasting or predict dean or targeting. the targets that was given the budget office responsibilities about getting the budget -- structural budget back into balance and i think if you think

of the situation we inherited and the problem we had, it was a budget deficit around 11% from a large part which was structural. if you continue duke it unsustainable. >> with talk about private sector. >> the right thing to target was getting the structural budget deficit back into balance and targets are additions to other figures >> you've talked today about rebalancing between manufacturing and services. at the moment according to financial services produced around 8% in manufacturing 13%, what would be the correct figures have a balanced economy? the 11% financing in 19% in german.

>> the balancing of the economies are less reliant on one part of the contrary >> what we really need to know is the balance between the two constitutes a rebalance the economy. he views the language to repeat and in many speeches i'm trying to get -- >> what it means the economy has got to come from the source is growth that it didn't come from in the past. growth is very much driven by government expenditure and consumption based on the back of borrowing rather than the other thing is growth can be based on, which is investment and export.

and the balance between exporting imports. >> the manufacturing will have to reduce something else. are you not? >> i'm looking at it in a slightly different way, which is saying given that you can't get demand through government expenditure, given that we have in the past have consumer led expenditure where we need to see growth is in business investment and also in exports. so that is what i mean by rebalancing. the second rebalancing is when you look at employment, clearly we're going to see a reduction in public site to employment so

you need to see growth in private other ways to rising unemployment. so we need to generate the dirt. but what i don't want to go is where the economist in the past somehow services there back in manufacturing is good. >> wishes try one more. for example >> you can look at per capita we have part of our country. but what you have seen his

income disparities grow between countries rather than shrinking. if you're trying to balance between all the regions are his income disparities reduce rather than increase. >> prime minister cummings talked about the need for a massive rebalancing of our economy you might be playing a key role in bringing this about, but when i've asked you a whole raft of issues of what this actually means beyond friendly language about rebalancing the economy, i can't say we've had much substance. you are not saying okay i want to see income differentials vary between the regions for example i want to see more jobs created in the north and even recognized less -- >> i wanted to think reducing

rather than increasing. >> a rebalance the economy between the regions therefore would be won by the northeast in london is left. >> over the last decade the disparity has been going and i would like to see that narrowed. >> a question on the other subject we have today which is overseas devotion military capacity to support it. >> good afternoon. i put a lot of questions here on no-fly zones. i think what if one really wants to know is what is the strategy? the exit strategy is to successfully implement the u.n. security council in